Start-up costs are typically capitalized or amortized over 15 years. However, up to $5,000 of these expenses are eligible to be expensed as a deduction. The remainder is amortized over 15 years. This deduction is phased out dollar for dollar for costs over $50,000.
Follow these steps to enter start-up costs or organizational expenditures:
- Go to the Depreciation (4562) input screen.
- In the Asset list on the left side of the screen, click Add.
- On this new asset, in Description of Property enter a description for the amortization expense.
- In Form (Ctrl+T), select the form to which the asset relates.
- In Category select Amortization.
- In Date Placed in Service, enter the date the amortizable expense occurred.
- In Cost or Basis, enter the expense amount.
- In Method, enter 91 to select the Straight Line method.
- In Life or class life (recovery period automatic), enter 15, or any other required life.
- In Amortization code section, select the applicable code: (i.e.) Sec. 195 for Business Start-Up Expenditures.
- In Basis Reduction (Amortizable costs expensed, ITC, etc.) enter the amount (up to $5,000) for first year startup costs.
Note: Startup costs and organizational expenditures aren't automatically included in ending accumulated amortization on the balance sheet.
To include these costs on the balance sheet:
- Go to the Balance Sheet screen.
- Enter the expenditure amount in the Intangible Assets* field under the Ending column.
- Enter the same expenditure amount in the Less Accumulated Amortization* field under the Ending column.
- Select the Forms tab and view Schedule L of the main form. The two amounts will offset each other on the Balance Sheet.